Chapter 9.1 - Corporate Planning and Implementation
Lesson Objective: Introduction to Change Management
We should now start diving in to strategic implementation:
After strategic analysis and strategic choice it is now finally time to put into effect the strategic plans decided upon.
Strategic Implementation involves some key activities:
Planning;
Controlling;
Allocating resources;
All activities which support the implementation of the chosen strategy.
The starting point of Strategic Implementation is planning: articulating a business plan, which includes:
The business objectives, the strategies themselves, and financial forecasts.
Structurally, a business plan is made of:
- Executive summary, an overview of the business and its strategies;
- Description of the business opportunity: details of the entrepreneur, product, and customers;
- Marketing and sales strategy: how the product will be sold and what triggers customers' interest into buying;
- Management team and personnel: skills and experiences of the people involved;
- Operations details: regarding facilities, premises, IT systems to be used, production methods;
- Financial forecasts: sales and profit projections alongside cashflow forecasts for at least one year.
Business plans, therefore, can be used to raise external finance, to provide business purpose as well as for existing businesses to revise existing strategies, make use of financial forecasts for budgeting and control, and even for finding additional financing.
For existing businesses these are called short-term plans.
On the other hand, Corporate Plans are long-term (> 1 year) plans consisting of:
The overall organization's objectives (profit targets, sales growth aims, market share);
Strategies attempting to meet those objectives, such as:
Market penetration (increase in sales of existing products)
Market development for existing products;
Product development for existing markets;
Diversification into new products and new markets.
The main objectives of different departments which are derived from the corporate's objective (MBO).
The advantages of having a strategic plan include:
Clear focus and purpose for executive for the coming several years;
Lower-level managers are made aware of long-term plans and can work towards;
Allows for control, assessment, and review of actual performance;
Forces executives and managers to consider the organization holistically and from an external perspective.
Obviously, the main limitation of strategic plans has to do with its long-term characteristics: they can become obsolete overtime (external changes) and therefore executives should be flexible for adapting to continue relevant.
Other stakeholders than just executives and managers are interested in corporate plans, specially:
- Potential investors;
- Major lenders;
- Governments (in case of expansion grants);
- All staff since individual goals are based off the corporate plan and objectives (MBO).
Corporate plans are heavily influenced by many internal and external factors:
Internally:
- Financial Resources to follow through the proposed strategies;
- Enough Operating Capacity if the plan is approved;
- Managerial Skills/Experience, specially in the case of diversification;
- Employees number and skills based on workforce planning;
- Organizational Culture, coming soon...
The main external influences, on the other hand, are:
Macroeconomic conditions: the business/economic cycle;
Central Bank and Government Economic Policies which can change overtime;
Technological Changes which are fast-changing and can quickly outdate plans;
Competitors' Actions are also to be relevant as they change the market.
As we just learned, Corporate Culture is an important internal influence on Corporate Plans.
But really is a Corporate Culture?
- These are the values, attitudes, and beliefs of the people working in an organization which guides their behavior towards all stakeholders.
- In other words, Corporate Culture gives a sense of identity to the people working in the organization.
- Corporate Culture is so important that it helps explain managers' decisions and behaviors.
There are four types of Corporate Culture:
Power Culture:
- Associated with autocratic leadership;
- Power is concentrated at the center of the organization;
- Quick decisions can be made and so responding to changes is easier;
- Appropriate for fast-paced organizations which market changes are common.
2. Role Culture:
- Associated with bureaucratic organizations;
- Everyone operates under rules;
- Little creativity is encouraged;
- Authority comes from well-defined structure;
- The workers' position establishes its power and influence;
- Good for predictable work;
- Slow adaption and slow towards market changes.
3. Task Culture:
- Teams are formed to solve particular problems or work on particular projects;
- Communication flows through the team from anyone;
- Power derives from expertise within the scope of the project/problem;
- No single power source; creativity is encouraged;
- A separate/particular culture may emerge within the team as they are entitled of decision-making.
4. Person Culture:
- The most creative culture;
- Individuals have the freedom to make their own decisions;
- Useful in organizations where people have similar training, background, and expertise (e.g. law firms, accounting firms);
- Power lies in groups of individuals;
- Risk of individuals developing individual goals that are conflictuous to those of the organization.
To summarize:
5. Entrepreneurial Culture:
Success is rewarded encouraging risk taking;
Failure is not criticized to boost creativity;
New business ventures are encouraged.
Apple's Functional Organization: Person + Entrepreneurial Culture
Example on how Culture mixes with Organizational Structure for success.
To-Do-List:
Term 1, Chapter 9 - Activity 9.1 (p. 144)
Chapter 9.1 - Corporate Planning and Implementation
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